Because this market is a monopolistically competitive market, the firm's average total cost in long-run equilibrium is average cost it would achieve as a firm operating in a perfectly competitive market. The production level of a monopolistically competitive firm in long-run equilibrium is firm. This difference in output is predicted by the firm. the long-run the production level of a perfectly competitive of a monopolistically competitive

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Chapter1: Making Economics Decisions
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Because this market is a monopolistically competitive market, the firm's average total cost in long-run equilibrium is
average cost it would achieve as a firm operating in a perfectly competitive market.
The production level of a monopolistically competitive firm in long-run equilibrium is
firm. This difference in output is predicted by the
firm.
the long-run
the production level of a perfectly competitive
of a monopolistically competitive
Transcribed Image Text:Because this market is a monopolistically competitive market, the firm's average total cost in long-run equilibrium is average cost it would achieve as a firm operating in a perfectly competitive market. The production level of a monopolistically competitive firm in long-run equilibrium is firm. This difference in output is predicted by the firm. the long-run the production level of a perfectly competitive of a monopolistically competitive
Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand (D) curve, marginal
revenue (MR) curve, marginal cost (MC) curve, and long-run average total cost (LRATC) curve. Assume that all firms in the industry face the same
cost structure.
Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next,
place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive
market.
Note: Dashed drop lines will automatically extend to both axes.
PRICE, COSTS, AND REVENUE (Dollars per jacket)
100
90
80
70
60
50
40
30
20
10
0
0
MC
LRATC
+
10 20 30 40 50 60 70
QUANTITY (Thousands of jackets)
Under...
Monopolistic Competition
Perfect Competition
MR
80 90 100
D
Compare the average total cost and the production level in the long-run equilibrium for a monopolistically competitive firm and a perfectly competitive
firm by completing the following table.
Average Cost
(Dollars per jacket)
Monopolistic Competition Outcome
Perfect Competition Outcome
Production Level
(Thousands of jackets)
Transcribed Image Text:Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand (D) curve, marginal revenue (MR) curve, marginal cost (MC) curve, and long-run average total cost (LRATC) curve. Assume that all firms in the industry face the same cost structure. Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market. Note: Dashed drop lines will automatically extend to both axes. PRICE, COSTS, AND REVENUE (Dollars per jacket) 100 90 80 70 60 50 40 30 20 10 0 0 MC LRATC + 10 20 30 40 50 60 70 QUANTITY (Thousands of jackets) Under... Monopolistic Competition Perfect Competition MR 80 90 100 D Compare the average total cost and the production level in the long-run equilibrium for a monopolistically competitive firm and a perfectly competitive firm by completing the following table. Average Cost (Dollars per jacket) Monopolistic Competition Outcome Perfect Competition Outcome Production Level (Thousands of jackets)
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